"Let Unsound Money Wither Away"
Friday, July 13, 2012
Let Unsound Money Wither Away - Joseph T. Salerno - Mises Daily.
I cannot conceive of a view more diametrically-opposed to the conventional wisdom than that of Ludwig von Mises as explained in the linked article. The reason why trillions in taxpayers' money was kicked in to save the banks is because the banks are inherently unstable. Government support for them allows them to create the illusion of greater wealth in the good times, but comes at the price of propping up their business model in the bad times. A business model that, if applied to any other enterprise, would be considered insane.
We are so dependent on our drug of choice - debt - that the shock of allowing the market to eliminate (as it almost certainly would) fractional reserve banking is too great for most of us to contemplate. Decades down the road, people might - luxuriating in a stable society where money held its value long-term - wonder why we didn't do it sooner. But right now, the debtors who would be forced to admit that their lifestyle is many times beyond their means constitute if not a majority, a politically-decisive minority. And as for the politicians who would have to admit their complicity in the dangerous scam of fractional reserve banking, the idea is just beyond contemplation.
To err is human but to be kind is optional. Thank you.
Posted by: Tom | Saturday, July 14, 2012 at 10:58 PM
That comment was meant to be directed to your two "nachas" posts.
It will be remedial "internet comments 101" summer school for Cascadian.
Posted by: Cascadian | Saturday, July 14, 2012 at 01:35 AM
Wonderful results achieved under difficult circumstances, you have every right to proud.
Le-hayyim.
Posted by: Cascadian | Saturday, July 14, 2012 at 01:28 AM
Debt. My bet is that it is a majority of people who function now on a basis of rolling debt. Moreover, for some they will see it as a "right" that is someone else's problem if it all goes badly wrong. Politcally, the result is that it has become necessary to promote non essential consumption debt as the basis of the economy.
Posted by: Demetrius | Friday, July 13, 2012 at 04:29 PM
Hmmmm...
perhaps we should accept that there is a difference between a medium of exchange and a long term store of value.
Is it the case that there were fewer depressions and banking crashes in the ninteenth century?
Posted by: Mark | Friday, July 13, 2012 at 04:08 PM